Nearly 80% of experts are optimistic about China's economy next year

Abstract Recently, the Financial Research Center at Fudan University published the latest China Economic Climate Index. The findings indicate that the one-year economic sentiment index has climbed to 36, marking a notable rise from the October figures. This suggests growing confidence among market participants regarding the outlook for China's economy in the coming year. Among global experts surveyed, 78.2% expect China’s economy to maintain or improve its position over the next 12 months, with 9.4% anticipating stability and 12.5% predicting a minor decline.

Optimistic Outlook on the Economy

Since the second half of this year, China has seen its economic slowdown effectively managed, leading to a gradual recovery and increased market confidence. This survey reinforces that perception. While the current economic sentiment index stands at 23.4—lower than the U.S. figure of 28.1—it significantly outperforms Europe’s index of -22.6. Looking ahead, the survey forecasts China’s growth rate in 2014 to remain stable around 7.6%.

Regarding key sectors like the stock and real estate markets, experts are generally positive about the Shanghai Composite Index. They foresee a bullish trend in the stock market, with expectations of rising revenues for financial institutions. On the other hand, housing price expectations have softened, with the housing price index showing a noticeable drop compared to previous periods. Many believe further reforms will bring more stability to the real estate sector.

“Overall, we believe that China’s economic future is promising,” said Sun Lijian, director of the Financial Research Center at Fudan University. He noted that this month’s survey shows a clear shift toward optimism compared to last month. From a regional perspective, while Beijing and Hong Kong saw some downward adjustments, cities like Shanghai, Guangzhou, Shenzhen, and Chongqing are showing signs of recovery.

Industry Recovery Drives Growth

According to Sun Lijian, one of the main factors supporting the improved economic climate is the gradual recovery across most industries. While construction remains affected by the real estate slowdown, sectors such as information technology, chemicals, telecommunications, and equipment manufacturing are showing upward momentum. However, as China continues to adjust its economic structure, overcapacity in certain industries is causing employment pressures, particularly in labor-intensive sectors, which has led to a decline in industry sentiment.

Despite recent changes in IPO policies affecting the stock market, experts remain optimistic about China’s capital market. Sun Lijian believes that strengthened banking regulations and reduced real estate mortgage lending have not hindered the capital market’s performance. With ongoing reforms and improved liquidity, both the Shanghai Composite Index and the ChiNext Index are expected to perform well, creating opportunities for investment banks and insurance firms.

Sun Lijian also highlighted the importance of the Third Plenary Session, which emphasized the market’s role in resource allocation, signaling increased market vitality and overall optimism about China’s economic future.

In addition, the Green Paper released by the National Information Center points to a generally stable international environment in 2014, with developed economies like the U.S., Japan, and Europe expected to improve. Domestically, after the 18th Party Congress, China has placed greater emphasis on structural adjustment and quality growth, with continued reform dividends, infrastructure investment, and inventory rebuilding driving steady economic expansion.

Challenges Ahead

While the overall economic trend is improving, several challenges remain. Zhu Baoliang, director of the Economic Forecasting Department at the National Information Center, pointed out that overcapacity continues to hinder recovery, financial risks are rising, real estate market fragmentation increases systemic risks, and rising operational costs may negatively impact future investments and technological upgrades.

“Although the indicators look good, the global economic equilibrium remains fragile,” Sun Lijian warned. He added that potential shifts in U.S. monetary policy could lead to large capital flows back to the U.S., triggering significant changes in future surveys. As U.S. inflation rises and geopolitical tensions persist, a sudden withdrawal of foreign capital could cause sharp fluctuations in China’s financial markets and pressure the RMB to depreciate.

“In 2014, China’s economy faces complex internal and external conditions,” Sun Lijian emphasized. He stressed the need for stability, maintaining momentum at the micro level, and adjusting macroeconomic policies appropriately. To achieve this, the market should play a decisive role in resource allocation, ensuring that capital flows back to the real economy. On one hand, administrative controls must be relaxed, while on the other, financial market bubbles and speculative activities must be closely monitored. At the same time, administrative efficiency must continue to improve, ensuring equal treatment for private and state-owned enterprises, allowing private capital to play a more significant role in the national economy.